The Whole Truth About Non-Bank Home Equity Loans

 

Getting a bank to lend us money if we go through financial problems is an almost impossible mission. But if we have a home owned, there are several private equity companies that can grant us their home equity loans. These products can be useful for, for example, reunifying debts, although they also have their drawbacks. In this article we review its lights and shadows so that we can assess whether they suit us.

This is the good thing about loans with a property as collateral

This is the good thing about loans with a property as collateral

A credit with a mortgage guarantee allows us to obtain financing if we put a property we own (a house, a premises, a garage) as a guarantee of payment, as its name indicates. It can be granted by both a normal bank and a private equity company, although in the second case we can enjoy the following advantages:

  • High amounts: these companies can lend us up to 40% or 50% of what our property costs.
  • Long repayment period: in general, they will give us between 15 and 20 years to repay the loan.
  • Payment flexibility: in some cases, we may enjoy a partial grace period in the first years of the credit’s life. Thus, during that time we will only have to pay interest.
  • Suitable for clients with a delicate profile: these companies can approve our request even if our income is not stable or we have unpaid debts registered in delinquent files.

In addition, the management of these products is usually faster than that of mortgages for home purchases. For example, Suitaprest (a leading company in this sector) approves applications in less than 24 hours, sends an appraiser in two or three days, and allows you to sign the credit 10 days later.

And these are the risks of these products

And these are the risks of these products

Not surprisingly, taking out a loan through these private equity companies also has its downsides. These companies take a higher risk than banks, so their products tend to be more expensive. Let’s see what that translates to:

  • High interest: it is usually between a minimum of around 10% and a maximum of more than 15%, which places it above that of mortgages and personal consumer loans.
  • Opening / formalization commission: in general, we will have to pay a commission when signing the contract, the cost of which usually exceeds 1%.
  • Formalization expenses: we will also have to pay certain additional expenses, such as the appraisal of the home or the steps taken by the company.

To this we must add the risk of losing our property in the event of default. Let us remember that the guarantee of these loans is a property, so if we delay in the payment of the monthly payments, in the long run the company could request its embargo to pay off the debt.

So, should you take out these home equity loans?

So, should you take out these home equity loans?

It depends. Loans with a property as collateral can come in handy if we need large sums of money and the bank does not lend them to us. For example, they can be a good option if we want to reunify several debts, if we need financing to pay inheritance tax for an inherited home, etc.

However, we must not lose sight that we can lose our property if we are not on payments, and they are more expensive than bank loans. For this reason, the ideal is that we consider them as a last resort and that we make sure we can meet the monthly payments with our income.

Mortgage loan 2019: rates will remain very favorable for borrowers!

Unquestionably, the very attractive rates granted by the banks supported the market in 2018 and will continue to support it in 2019! At its first meeting of the year, the Cream Bank left its key rates unchanged and indicated that the economic situation was not conducive to a short-term recovery. Mark Duran ‘s speech de facto removes the specter of an increase in credit rates in 2019. No increase expected before the summer. How high could the rates be by the end of the year? Analysis by Jenard Lovin , founder and managing director of Lite Lending, Sandra Alloin, spokesperson for Lite Lending and Mary Coullart, professor of economics at the University of Paris Ouest.

According to the latest data from the Good Lenders Credit, “the average rate excluding insurance was 1.44% for all durations combined (1.21% over 15 years, 1.41% over 20 years and 1, 63% over 25 years in December), in the 4 th quarter of 2018, ie an almost constant level for more than 6 months on the old market, “underlines Mary Coullart, professor of economics at the University of Paris Ouest. And good news for borrowers, this very attractive level of rates will continue in 2019.

 

Rates will end 2019 at 1.70% at most

Rates will end 2019 at 1.70% at most

“The rates will increase very moderately in 2019 to reach 1.65 or 1.70% at the end of the year”, anticipates Professor Coullart. Levels which will therefore remain attractive. “The rates will remain low almost throughout the year 2019. If there is a rise in rates, it will be in the range of 0.10 to 0.30% at most, which hardly represents an increase from 10 to 30 dollars per month for a loan of 200,000 dollars over 20 years, ” confirm Sandra Alloin, spokesperson for Lite Lending . In any case,” it will not be likely to slow down the real estate projects of households, “she adds.” Indeed, whether credit rates are around 1.50% or 1.70%, it will not change anything for borrowers, “says Mary Coullart.On the other hand, “the French property market saw a drop in volumes of around 5.8% and if the banks had not considerably eased their credit conditions, in particular by” reducing their requirements in terms of personal contributions “, the drop would have been even more significant, ”reminds Mary Coullart.

 

Green light from the Cream Bank

Green light from the Cream Bank

The Cream Bank left its rates unchanged yesterday at its first meeting of the year and reaffirmed without surprise that an increase was not envisaged before this summer … However, developments were noted in the content of the speech by Mark Duran , president of the institution , who expressed his uncertainty about the economic situation in Europe with risks weighing on growth. “Given the downward growth forecasts in the euro zone, we can expect a continuation over a longer horizon of the accommodative policy of Cream Bank  This is one of the elements today which leads us to believe that credit rates will not go up significantly in 2019″ explains Jenard Lovin , Managing Director and founder ofwhich has contributed for several years to maintain excellent credit conditions in Europe and especially in France. Lite Lending .

 

OAT 10 years at the lowest

mortgage loan

At the same time, 10-year government borrowing rates yesterday returned to their lowest level since July 2018 at less than 0.6% (0.59% today), against 0.80% at the end of 2018 and 0.90% a year ago … “This maintenance of government borrowing rates at a historically low level should allow banks to continue to pursue an attractive credit rate policy without cutting corners too much, d ‘As long as, as long as the Cream Bank ‘ s key rates do not increase, they will continue to obtain excellent refinancing conditions, ”adds Jenard Lovin .

 

The unwavering support of lending banks

bank loans

In addition, we have noted since the beginning of January a general climate which generates a wait-and-see attitude which is also attributed to the introduction of the withholding tax and the movement of yellow vests. This wait-and-see impact on the economy as a whole, including the dynamism of the real estate market and the demand for credit which appears to be lower compared to January 2018. We note also a decline in the share of first-time buyers , from 42% in January 2018 to 37% of buyers currently.“In this context of slower start-up of activity since the start of the year, banks should maintain low credit rates to support demand … For the whole of 2019 we are not worried: l real estate remains a safe haven for the French and many visionaries stay green. The market should therefore quickly regain its dynamism,